It’s an open secret that the Chinese government and related Chinese companies conduct espionage against Western governments and companies operating both in and outside China. The Google GMail attacks represent a kind of “last straw” scenario. And it’s all but certain that this episode was either initiated by the government or done with government knowledge or support. Hence the Google ultimatum to the Chinese and the US State Department’s relatively direct statement, “We look to the Chinese government for an explanation.”

However the Chinese government, for its part, issued a bland statement that suggested it likely wasn’t going to allow Google to operate unfiltered or negotiate with the search engine. According to a Bloomberg report:

“The Chinese government administers the Internet according to law and we have explicit stipulations over what content can be spread on the Internet,” Foreign Ministry spokeswoman Jiang Yu said at a regular briefing in Beijing today. Chinese law prohibits hacking and other forms of online attacks, she said, declining to say whether that law also applies to state agencies.

Meanwhile the state-controlled People’s Daily called Google a “spoiled child” and, according to the Washington Post, predicted that it would not make good on its threat to leave China. Some cynics also don’t believe that Google will exit the market and suggest that the company is bluffing. However Google has placed itself in a position where it has little “wiggle room” without concessions from the Chinese, which don’t appear to be forthcoming. We can thus probably expect a shut down of Google.cn in the coming weeks.

According to another Bloomberg report Google employees in China are being put on involuntary “holiday” for an uncertain period of time.

Assuming Google does formally leave China, it is far from certain that Bing will be the beneficiary. Microsoft, prior to this incident, said China would be the top priority for Bing this year. While there could be gains by Bing, Baidu will likely further consolidate its control over the Chinese market.

About The Author

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.